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Gambling loopholes grow as state waits to reform rules

Days after an administrative law judge ruled last month that the barrel races held at a fledgling North Florida racino were not a legitimate pari-mutuel sport, state regulators crafted a license to allow for “flag-drop” races, the first of its kind, to replace them.

In the last two years, the same regulators have allowed for slot machine operators to run electronic roulette and craps games in Miami-Dade and Broward, allowed a dormant jai alai permit to be used to expand the number of slot machines at Magic City Casino, and allowed Tampa Bay Downs and Gulfstream Racetrack to run a one-time race in June so they could offer thoroughbred races via simulcast year-round.

These are just among a handful of decisions by state regulators that have effectively expanded the gambling footprint in Florida under Gov. Rick Scott.

“There are a couple of clever lawyers out there and we’re seeing a lot of strange decisions,’’ said Kent Stirling, executive director of the Florida Horsemen’s Benevolent and Protective Association, told the Herald/Times. “If the law doesn’t specifically say no, the answer from the department seems to be, always, yes.”

The rulings have not gone without notice by top legislative leaders who have ordered up a comprehensive study of gambling in Florida. They say they want the debate to include the loophole-driven expansion of gambling, as well as a discussion about whether to authorize destination resort casinos being pushed by the world’s gambling giants.

On Monday, legislators will receive the first of a two-part, $388,000 study ordered from Spectrum Gaming Group, a New Jersey-based expert in gambling analysis. The second part will come in October and legislators expect to recommend changes in March that could include whether or not to approve destination gambling.

“It behooves the Legislature to walk through all the statutes very deliberately with the goal of possibly rewriting those statutes to add clarification,’’ said Sen. Garrett Richter, R-Naples, chairman of the Senate Gaming Committee that will conduct the review next session.

Sen. John Thrasher, R-St. Augustine, a veteran of the gambling law fight who once lobbied on behalf of the Jacksonville greyhound track, believes the Legislature’s failure to reform its gambling laws has led to the inadvertent expansion of gambling.

“There are people who are looking at loopholes and these things expand gambling,’’ he said. “I’m for closing loopholes. I’m not for expanding gambling in Florida.’’

Lawyers at the Florida Department of Business and Professional Regulation’s Division of Pari-Mutuel Wagering, wouldn’t comment Friday when asked about the pattern of rulings.

“DBPR is a regulatory agency that implements the laws created by the Legislature,’’ said Ronnie Whitaker, DBPR chief of staff.

A draft of the first part of the Spectrum report suggests that “the overall financial trend for Florida pari-mutuels has been on a steady downward spiral.” But if the Legislature refrains from putting together a comprehensive gambling plan, as it has in the past, the report warns there will be consequences.

“Based on our research and experience in Florida and elsewhere, gaming will evolve in Florida whether or not the Florida Legislature develops a plan and puts that plan into action,’’ the draft report concludes. “Absent any plan, however, that evolution would be haphazard and would be far less likely to address or advance any public-policy goals.”

The current tangle of regulations shows how haphazard things are:

Last year, the state allowed slot machine operators to run electronic games that mimic live roulette and craps games in Miami Dade and Broward. The shift raises questions about whether the casino look-alikes violate the gaming compact which gives the Seminole Tribe exclusive rights to operate casino-style table games in Florida.

• John Lockwood, a lawyer working for Magic City Casino, used a loophole in the law regulating jai alai to allow the casino to get more slot machines.
• Marc Dunbar and David Rominik, lawyers and part owners in Gretna’s race track, persuaded regulators twice to allow them to bring alternative quarter horse racing to the track there despite vigorous opposition from the quarter horse industry which claimed it would hurt the growing industry.
• Dunbar is currently asking the state to convert Gulfstream’s unused quarter horse permit to property the company owns in Miami, so it can expand its slot machines operations there.

“My job for my client is to pursue their agenda and obviously I have a group of clients that are involved in the gambling industry that are pushing the envelope,’’ Dunbar said.

As each change approved by regulators affects one sector of the highly-competitive pari-mutuel market, another sector complains. The result: an avalanche of 21 lawsuits pending against the division.

On Friday, Calder Racetrack’s lawyers and Florida horse breeders and owners appeared before regulators warning that their decision to allow Tampa Bay Downs and Gulfstream Racetrack in Hallandale Beach to expand their simulcast schedule may increase competition — but at a steep cost of Florida’s horse industry and its 6,000 breeders and owners.

“The governor is trying to bring new jobs to Florida, but this is something driving jobs away from Florida,” Stirling said at the hearing.

The company said the decision has already cost Calder $1.7 million and predicted it would cost $7.4 million in the next year. Stirling warned it would also send hundreds of people in ancillary industries into the unemployment line, and shift money from the live racing purses for Florida-bred horses to out-of-state racetracks.

“Without summer racing there is no industry in Florida,’’ said John Marshall, vice president of horse racing at Calder. “Two-year-olds need to race in the summer so they are ready to race when they are three years old,’’ the prime year for champion horses.

Dunbar and Lockwood acknowledge they are hired to exploit the holes in Florida’s gambling laws, but both suggest legislators should consider more comprehensive regulation, such as a gaming commission, similar to those in most major gaming states.

“You cannot legislate every realm of possibility in gaming law,’’ Lockwood said. “Everybody is creative. They’re looking for a work around.”

Dunbar said legislators are likely to resist change as they always have unless the governor steps up and sets the parameters of the debate, as former Gov. Jeb Bush did a decade ago.

“Until that happens, we will not get the comprehensive reform that we need,’’ he said. “The real heavy is the threat of the veto pen. The industry is desperate right now and we will actually help them constrict gambling — provided there are relief points.”

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